T-2803-76
Agence de Sécurité Générale Inc. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Marceau J.—Quebec City, Novem-
ber 21 and 22, 1979; Ottawa, January 17, 1980.
Crown — Contracts — Bids for contract included amounts
for wages calculated on minimum wage at date of contract —
Contract altered on first increase in minimum wage to reflect
plaintiff 's increased costs — On second increase in minimum
wage, defendant refused to alter contract, insisted that obliga
tions did not exist beyond original contract and claimed reim
bursement for overpayment — Whether or not plaintiff en
titled to increase in payments to reflect increased costs due to
raises in minimum wage — Quebec Civil Code, articles 1013,
1234.
Pursuant to a three-year contract signed in 1973, plaintiff
undertook to provide parking services at the Quebec City
airport. The bid submitted indicated an amount for fees and
salaries calculated at the minimum wage in effect at that time.
The contract was amended twice by complementary agree
ments, the second amendment reflecting an increase in the cost
of salaries brought about by a rise in the minimum wage. When
a second increase in the minimum wage occurred, the Depart
ment of Transport analyzed the terms of the contract, conclud
ed that the plaintiff was not entitled to reimbursement of any
wages beyond the amount contracted for and sought a reim
bursement for overpayment. Plaintiff completed the contract,
rather than exercising its option to rescind, arid brought this
action claiming that subparagraph (iv) of paragraph (a) of
clause 22 dealing with increases in "fringe benefits" included
increases in the minimum wage.
Held, the action is dismissed. The phrase "fringe benefits"
does not include increases in the minimum wage. "Fringe
benefits" and "salary" definitely cannot be taken as referring
to the same set of facts, whether in ordinary usage, legal
language or the language of business. These concepts may be
treated as on the same footing for certain purposes, as compo
nent parts of a workman's pay, but this does not mean that they
should be confused. The terms are not synonymous. It cannot
be maintained that a contract must be interpreted to give effect
to the mutual intent of the parties, and that it is the mutual
intent that must prevail. An unequivocal clause of a contract
cannot be interpreted in any other way than in its literal sense;
this is a fundamental principle of interpretation that is clearly
confirmed by article 1013 of the Civil Code. Further, the value
of testimonial evidence seeking to contradict the terms of a
validly made contract may be questioned. Finally, and most
importantly, the evidence resting on the testimony of plaintiffs
president is hardly conclusive. The plaintiff further argued that
the contract in question gave rise to two complementary agree-
ments that were to give effect to increases in the minimum
wage and those increases were paid without protest for over a
year. The argument that the terms of the contract were thereby
amended while it was being performed cannot be accepted
because the premise, that the additional agreements were con
cluded for this purpose or that the reimbursements were made
without objection had to be interpreted in this way, cannot be
assumed. The complementary agreements expressly confirmed
that all the words of the contract continued to have full effect.
Their sole purpose was to correct the figure given in the
schedule for the minimum wage which the contractor was
required to meet.
ACTION.
COUNSEL:
G. Vaillancourt for plaintiff.
Y. Brisson for defendant.
SOLICITORS:
Langlois, Drouin & Associés, Quebec City,
for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following is the English version of the
reasons for judgment rendered by
MARCEAU J.: Plaintiff is claiming from defend
ant the sum of $20,800, which it says is the
balance of remuneration to which it is entitled for
services rendered in accordance with a contract.
Defendant denies that she is indebted to plaintiff
under the contract in question; she even contends
that she paid it some $11,000 more than it was
owed.' The difference is not a matter of figures, or
of the manner in which the work was done. It is
the exact scope of certain clauses of this contract
which bound the parties, and hence the conditions
in which it was to be performed, which is at issue.
The problem is therefore essentially one of inter
pretation, but one which must be presented and
resolved on the basis of a series of facts which I
shall discuss in some detail.
Defendant claimed reimbursement of the amount in a
counterclaim which she attached to her defence, but which at
the close of the hearing she discontinued, reserving her
remedies.
In June 1973 defendant, specifically her Minis
ter of Transport, placed calls for tenders in the
newspapers for the management and operation of
her public parking area at the Quebec City air
port. The Department wished to make a private
concern responsible for providing the necessary
manpower to keep the parking area in good condi
tion, provide supervision and collect the necessary
charges from users. Specifications were sent to
those requesting them. The specifications stated
that the contract would be for three years, begin
ning on or about September 1, 1973. They gave all
the terms and conditions of the contract to be
awarded. They explained, inter alia, that the con
tractor had to undertake to provide and pay the
manpower necessary to keep the parking area
operating eighteen hours a day, and Her Majesty
for her part undertook to reimburse salaries in fact
paid and to pay management fees. Bids made by
persons concerned naturally had to cover the total
annual cost represented by such salaries and fees.
An information meeting would be held to answer
possible questions from interested parties.
Plaintiff obtained the specifications. Its presi
dent attended the information meeting; the follow
ing day, he received by telegram, at the same time
as other participants, certain clarifications regard
ing questions raised the previous day and not fully
answered; he even personally requested certain
additional information from an employee of the
Department. Plaintiff was definitely interested,.
and submitted its bid. The bid which it presented
indicated a total cost for three years of $77,608.92,
$17,072.64 per annum in salaries and the rest in
fees. It should at once be noted that the bid set
salaries at the minimum wage then imposed by the
Fair Wages and Hours of Labour Act, R.S.C.
1970, c. L-3, the provisions of which necessarily
applied (sections 3 et seq. of the Act), and refer
ence to which was made in a schedule attached to
the specifications. This was the lowest offer and
plaintiff was awarded the contract.
The contract was not in fact signed until
December 19, 1973, a long time after operations
commenced on November 1. However, it had been
authorized from the preceding August 29 (T.B.
72-1768 of August 29, 1973) and its terms were
established. It of course restated, as it had to, the
terms and conditions set out in the specifications,
and further set out the information and figures
relating to the bid which it was designed to con
firm. Defendant's obligations were specified in
clause 22. This contained two paragraphs. The
first, (a), which was itself divided into four sub-
paragraphs, dealt with salaries and wages; the
second, (b), with management fees. The introduc
tory portion of the clause, the initial paragraph of
(a) and the first subparagraph, (i), are worth
reading:
[TRANSLATION] 22. In consideration of the foregoing and of
the observation and performance by the company of stipula
tions, conditional clauses and conditions contained in this
agreement and to be observed and performed by the company,
Her Majesty, with respect to the charges and expenses incurred
by the company in performing the said services and with
relation to the total remuneration, shall pay the company the
following sums of money.
(a) Real and reasonable expenses paid by the company to its
employees, in salaries and wages, for performance of the said
services, but not exceeding the annual amount for contractual
years pursuant to this bid.
(i) A sum of salaries and wages not exceeding $17,072.64 for
the contractual year beginning November 1, 1973 and ending
on October 31, 1974.
A sum of salaries and wages not exceeding $17,072.64 for
the contractual year beginning November 1, 1974 and ending
on October 31, 1975.
A sum of salaries and wages not exceeding $17,072.64 for
the contractual year beginning November 1, 1975 and ending
on October 31, 1976.
At the time this contract was signed, giving
effect, as noted above, to all aspects of the call for
tenders and the bid, the parties were already aware
that it would have to be altered somewhat. Even
before operations commenced in November, the
Department had thought of keeping the parking
area open continuously, rather than only eighteen
hours a day, and plaintiff had accepted the pro
posal, provided of course that the figures of its bid
and those in the contract were adjusted according
ly. To do this, new authorization was needed from
the Treasury Board, since a greater cost was
involved. The formalities were completed on April
25, 1974, and on June 10, a complementary agree
ment was signed which retroactively amended
clause 22 of the contract, in particular altering the
maximum annual amount payable for salaries and
wages from $17,072.64 to $22,763.52.
All appeared in order; but it was at this point
that difficulties commenced. On April 1, 1974 the
minimum wage payable under the Fair Wages and
Hours of Labour Act was raised from $1.90 to
$2.20. Plaintiff automatically had to comply with
this change, and the Department in any case
required it to sign a complementary agreement
replacing the schedule attached to the contract,
which it will be recalled was based on the old
rates. It then began paying its employees at the
new rate and in its periodic reports claimed reim
bursement in full of the salaries which had thus
been increased. Its claims were met. A year later,
on June 13, 1975, the federal minimum wage was
again amended and this time was raised to $3.10.
A new complementary agreement again amended
the schedule. However, the claims made in accord
ance with the new rates raised some doubts and led
to a review of the situation, because it appeared
that the amounts authorized would be insufficient.
The Department's financial services undertook to
analyze the payments, while the legal services
scrutinized the terms of the contract. It was con
cluded that plaintiff was not entitled to any reim
bursement of wages beyond the- maximum amount
provided for, regardless of increases which might
have occurred in the federal minimum wage. It
was accordingly required to reimburse the over-
payments which had been made to it since the
increase of April 1 in the preceding year, and in
future to comply strictly with the obligations it
had undertaken, onerous though these might have
become. Plaintiff naturally protested, but rather
than rescind its contract, as it was given the option
of doing, it preferred to complete performance and
reserve its remedies. In July 1976, it brought the
action at bar.
Those are the facts of the case and the circum
stances in which the issue arose. It only remains
for me to discuss the respective positions of the
parties.
Defendant's position is quite obvious. Like the
officers of the Department at the time of their
intervention in June 1975, she relies on the con
tract, and apparently quite correctly. Clause 22,
which I have reproduced in part above, stated
unequivocally that expenses for salaries and wages
should not exceed the annual amounts provided for
in the bid. It set limits, "ceilings", which were of
course of the very essence of the contract and were
necessary as the reason the Department wished to
contract for three years, and for this purpose made
calls for tenders, was clearly so that it could obtain
a definite figure as to costs, and hence as to the
annual wages payable for labour, which constitut
ed the greater part of such costs.
Plaintiff did not dispute the initial impression
left by reading the contract. However, it contended
that a closer reading of the monetary clauses as a
whole leads to the conclusion that the cost agreed
upon could still be increased, in the event of an
increase in the minimum wage imposed by the
Act; in any case, this was the interpretation which
it and officers of the Department gave to the
conditions in the specifications; and anyway
defendant agreed, after the contract had been
signed, to raise the "ceilings" in accordance with
the new applicable minimum wages. These are the
three alternative arguments on which plaintiff
based its action. Its success or failure must depend
on their merits.
(a) Plaintiff contended, first, that a complete
analysis of clause 22 leads necessarily to the con
clusion that the agreed "ceilings" would in fact be
raised, if the minimum wages imposed by the Act
were increased. It relied on one of the subpara-
graphs of paragraph (a) of clause 22, which reads
as follows:
[TRANSLATION] If during the term of this agreement a statute
is duly enacted requiring employees of the company to be paid
fringe benefits in addition to those in effect at the date of this
agreement, or if an amendment to the existing Act provides
that the company shall make a greater contribution to the said
fringe benefits, the Minister may increase the amounts agreed
on in clause 22(a)(î), up to the amount of the additional cost.
Plaintiff argued that the phrase "fringe bene
fits" included increases in the minimum wage, and
to lend weight to its argument it cited decisions
which it said had, for certain purposes, treated
"fringe benefits" and "salary" 2 as one and the
same. In my view this argument is untenable.
"Fringe benefits" and "salary" definitely cannot
be taken as referring to the same set of facts,
whether in ordinary usage, legal language or the
language of business. It is understandable that
these concepts may be treated as on the same
footing for certain purposes, as component parts of
a workman's pay, but this does not mean that they
should be confused. The terms are not synony
mous. The meaning which plaintiff seeks to attrib
ute to clause 22(a)(iv) simply does not correspond
to what it says. The interpretation which it sug
gested is not possible.
(b) Plaintiff contended in its second argument
that this nonetheless is the interpretation which it
gave to the clause, and which an officer of the
Department confirmed during the information
meeting on the specifications, at which several
clauses of the contract were discussed, and the
following day at an interview requested by plain
tiffs president. It maintained that a contract must
be interpreted to give effect to the mutual intent of
the parties, and that it is this mutual intent which
must prevail.
This second argument is no more acceptable
than the first. To begin with, an unequivocal
clause of a contract cannot be interpreted in any
other way than in its literal sense; this is a funda
mental principle of interpretation and one which
the article of the Quebec Civil Code referred to by
counsel for the plaintiff, article 1013, in fact clear
ly confirms. Secondly, referring once again to the
Civil Code and to the rules of evidence which it
enacts (article 1234), the value of testimonial evi
dence seeking to contradict the terms of a validly
made contract may be questioned. Finally, and
most importantly, the evidence is hardly conclu
sive, as it rests on the testimony of plaintiffs
president, who told the Court that, based on the
statements allegedly made before him by an offi
cer of the Department, he understood that the
clause relating to fringe benefits covered increases
in the minimum wage. Quite apart from the fact
2 It cited: C.P.R. Co. v. Fumagalli (1963) 38 D.L.R. (2d)
110; Regina v. Fuller, Ex parte Earles and McKee (1968) 70
D.L.R. (2d) 108; Re Whonnock Lumber Co. Ltd. and Minister
of Finance (1970) 12 D.L.R. (3d) 298; Menhennet v. Schoen-
holz (1971) 20 D.L.R. (3d) 395; Balla v. Corporate-Plan
Leasing Ltd. (1973) 35 D.L.R. (3d) 360.
that the officer in question has no recollection of
having discussed the clause, I do not see how an
exchange like that referred to, at the time it took
place and especially with a junior employee, could
provide evidence of an intent on the part of
defendant at variance with that stated in the
contract.
(c) The third argument put forward by plaintiff
is undoubtedly more attractive than the first two.
The contract in question is one which gave rise to
two complementary agreements, the purpose of
which was specifically to give effect to increases in
the minimum wage, and the increased wages were
paid without protest for more than a year. How
ever, in order to conclude, as plaintiff's argument
suggests, that the terms of the contract were there
by amended while it was being performed, it would
have to be assumed that the additional agreements
were concluded for this purpose or that the reim
bursements made without objection had to be
interpreted in this way. In my opinion it is not
possible to conclude this. The complementary
agreements expressly confirmed in as many words
that all the clauses of the contract continued to
have full effect. Their sole purpose was clearly to
correct the figure given in the schedule for the
minimum wage which the contractor was required
to meet. Furthermore, they were to be anticipated,
because the schedule attached to the specifications
and to the initial contract (like the two which
subsequently replaced it) contained the following
statement:
[TRANSLATION] The contractor shall note:
(a) that during the course of this contract the wage rates set
forth in the schedule may be revised in accordance with
section 2(e) of the conditions of work,
Furthermore, the fact the Department's account
ing services, in day-to-day operations, accepted
bimonthly invoices as submitted, definitely does
not in itself constitute evidence of agreement by
defendant to amend the contract and waive the
rights resulting therefrom. It is true that the
Department's officers assumed that the increase
could give rise to the claims made, but if the rights
of parties contracting with the government were to
be determined on the basis of the reactions, opin
ions and actions of all the employees of its depart
ments, the sound administration of public funds
would become very difficult indeed. In short, this
third argument appears to be as unacceptable as
the first two.
In my opinion, in law defendant's position is
beyond challenge. There was a contract; its terms
are clear and were subsequently amended either
expressly or by implication. The terms and condi
tions which it contains, onerous though they may
be, are still "the law of the parties". Plaintiff was
not entitled to claim reimbursement of labour costs
beyond the maximum annual amounts provided
for. Its action is without foundation.
However, I will make one final observation. If
ever there were a case submitted for my consider
ation in which the law as I interpreted it did not
appear to fully satisfy the requirements of equity,
this is such a case. It certainly must be admitted
that plaintiff acted incautiously; it should have
foreseen—as anyone bidding on a service contract
to cover a certain period of time must necessarily
do—the eventualities that are likely to arise, and
take action to protect itself adequately. It must
undoubtedly also be admitted that observance of
the principle that a contract is binding, regardless
of eventualities that may arise after it has been
concluded, is crucial in a system of public tenders.
However, the fact remains that in the case at bar,
the actions of employees of the Department can
hardly be described as having been very cautious,
and it is apparent that the situation which under
mined plaintiff's predictions was one which result
ed from a decision by defendant herself. I think
that these factors should be considered before
proceeding further with the claim for reimburse
ment set forth by the now withdrawn counter
claim.
At all events, the action at bar is without foun
dation and will be dismissed.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.